Jonathan Reynolds MP, Secretary of State for Business and Trade, has confirmed in a ministerial statement to Parliament, that Labour will take forward the previous government’s proposal to increase the monetary size thresholds for micro, small and medium-sized entities. 

Legislation to increase the turnover and net asset size thresholds by approximately 50% is due to be laid before parliament by the end of the year and is expected to come into force on 6 April 2025. 

The measures, which will also remove several obsolete or overlapping requirements relating to the contents of the directors’ report and the directors’ remuneration report, are designed to ease the UK’s regulatory burden, particularly with regard to non-financial reporting. 

Companies able to move down a size category will be entitled to the accompanying reduction in reporting requirements. According to the government, a deregulatory saving of more than £240m per year to UK companies is expected.

The government has also announced that it will not be taking forward proposals at the current time relating to medium-sized companies, which was consulted on by the previous requirement just prior to the UK general election. 

The proposals suggested increasing the employee number threshold from 250 to 500 and removing the requirement for medium-sized companies to prepare a strategic report. Following feedback – including from ICAEW – that a more holistic review of thresholds and the wider reporting framework is necessary, the government has decided not to proceed with these proposals, which considered medium-sized entities in isolation.

The Secretary of State has announced, however, that the Department of Business and Trade will undertake a detailed consultation on the Future of Corporate Reporting. This will be launched next year and will focus on simplifying and modernising non-financial reporting to better meet business and investor needs. The proposals relating to medium-sized entities will be considered as part of this broader consultation.

“We are pleased that the government will be consulting on further measures to refresh and rationalise current reporting requirements, says Kate Beeston, Technical Manager in the Corporate Reporting Faculty. “ICAEW has long been calling for the UK government to review the underlying legislative framework and the requirements for the strategic and directors’ report. Now, more than ever, it is critical for government to ensure that the foundations for non-financial reporting are sufficiently robust to support the integration of future non-financial reporting developments, including sustainability reporting, into UK company law.”

ICAEW will be monitoring government activity in this area and will keep members informed of developments as they progress.